Will My Property Taxes Change When I Refinance?

Refinancing can be a great money-saving move, and one of the biggest questions asked when inquiring about a refinance is, “how will this affect my current property taxes?”

From a tax perspective, refinancing is viewed differently than an initial mortgage, because it's seen as "debt restructuring.”  The primary time that property taxes change in California is when the ownership of a property changes. When you refinance your mortgage, there is no ownership changing hands — you still own it. A refinance does involve a change in title, since you execute a new trust deed that gives the new lender rights to the property, but that change is not considered an actual change of ownership. As such, your property does not get reassessed.

A simple cash out refinance, or a rate and term will not trigger a reassessment in most cases.  There are two major exceptions, however. First, a sale. If you sell your home to someone else, then repurchase, you don’t get the old tax basis back unless you are utilizing county specific tax base transfer laws. Second, improvements. If you take out a building permit, the assessor will add the current value of your improvements to your tax bill.  This can, in some situations, can trigger a reassessment resulting in a tax bill if you add a room to your current home. 

Property Tax Increase

Your property taxes will still increase yearly, though. Under California’s Proposition 13 property tax law, barring any other changes, your property taxes can go up by the lesser of the increase in the value of your property or 2 percent a year. If your property lost value because of the downturn, and you create value through repairing it, a cash-out refi could return you to having slight annual increases in property taxes moving forward.

Always consult a tax professional with complex questions on any type of taxes. 

 If you've been hesitant to start the refinance process because you're worried your property taxes will increase, you can put those fears to rest. Refinancing won't impact your property taxes, and it offers many other benefits that can help you reach your financial goals. Explore your refinancing options by starting with our online application and connect with us today!